Switch to:
WSP Holdings Ltd (NYSE:WH)
Return on Assets
-7.72% (As of Mar. 2013)

Return on assets is calculated as net income divided by its total assets. WSP Holdings Ltd's annualized net income for the quarter that ended in Mar. 2013 was \$-103.3 Mil. WSP Holdings Ltd's total assets for the quarter that ended in Mar. 2013 was \$1,336.2 Mil. Therefore, WSP Holdings Ltd's annualized return on assests (ROA) for the quarter that ended in Mar. 2013 was -7.72%.

WH' s 10-Year Return on Assets Range
Min: 0   Max: 0
Current: 0

WH's Return on Assetsis ranked lower than
56% of the 449 Companies
in the Global Oil & Gas Equipment & Services industry.

( Industry Median: 3.95 vs. WH: 0.00 )

Definition

WSP Holdings Ltd's annualized Return on Assets (ROA) for the fiscal year that ended in Dec. 2012 is calculated as:

 Return on Assets (ROA) (A: Dec. 2012 ) = Net Income (A: Dec. 2012 ) / Total Assets (A: Dec. 2012 ) = -84.185 / 1390.322 = -6.06 %

WSP Holdings Ltd's annualized Return on Assets (ROA) for the quarter that ended in Mar. 2013 is calculated as:

 Return on Assets (ROA) (Q: Mar. 2013 ) = Net Income (Q: Mar. 2013 ) / Total Assets (Q: Mar. 2013 ) = -103.304 / 1336.168 = -7.72 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

In the calculation of annual return on assets, the net income of the last fiscal year is used. The total assets are from the end of year data. Strictly speaking, average total assets over the fiscal year should be used. In calculating the quarterly data, the Net Income data used here is four times the quarterly (Mar. 2013) net income data. Return on assets is displayed in the 10-year financial page.

Explanation

Return on assets (ROA) measures the rate of return on the total assets (shareholder equity plus liabilities). It measures a firm's efficiency at generating profits from shareholders' equity plus its liabilities. ROA shows how well a company uses what it has to generate earnings. ROAs can vary drastically across industries. Therefore, return on assets should not be used to compare companies in different industries. For retailers, a ROA of higher than 5% is expected. For example, Wal-Mart (WMT) has a ROA of about 8% as of 2012. For banks, ROA is close to their interest spread. A banks ROA is typically well under 2%.

Similar to ROE, ROA is affected by profit margins and asset turnover. This can be seen from the Du Pont Formula:

 Return on Assets (ROA) (Q: Mar. 2013 ) = Net Income / Total Assets = -103.304 / 1336.168 = (Net Income / Revenue) * (Revenue / Total Assets) = (-103.304 / 119.34) * (119.34 / 1336.168) = Net Profit Margin * Asset Turnover = -0.8656 * 0.0893 = -7.72 %

Note: The Net Income data used here is four times the quarterly (Mar. 2013) net income data.

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Be Aware

Like ROE, ROA is calculated with only 12 months data. Fluctuations in the companys earnings or business cycles can affect the ratio drastically. It is important to look at the ratio from a long term perspective. ROA can be affected by events such as stock buyback or issuance, and by goodwill, a companys tax rate and its interest payment. ROA may not reflect the true earning power of the assets. A more accurate measurement is Return on Capital (ROC).

Many analysts argue the higher return the better. Buffett states that really high ROA may indicate vulnerability in the durability of the competitive advantage.

E.g. Raising \$43b to take on KO is impossible, but \$1.7b to take on Moodys is. Although Moodys ROA and underlying economics is far superior to Coca Cola, the durability is far weaker because of lower entry cost.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

WSP Holdings Ltd Annual Data

 Dec04 Dec05 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 ROA 0.00 0.00 8.94 14.25 9.01 7.58 0.30 -8.92 -4.36 -6.06

WSP Holdings Ltd Quarterly Data

 Dec10 Mar11 Jun11 Sep11 Dec11 Mar12 Jun12 Sep12 Dec12 Mar13 ROA -15.88 -3.96 -5.04 -4.16 -4.80 -4.48 -4.56 -6.40 -8.40 -7.72
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to \$400 per referral. ( Learn More)